Heathrow – thrive or die?

At the Lookwest debate yesterday focussed on the future of Heathrow, speakers discussed what potential futures might exist for Heathrow – including its closure and the redevelopment of the site.

Heathrow is a large part of the West London economy – around £10bn Gross Vale Added – and itself makes roughly the same contribution to UK Plc as the city of Manchester. It provides 76,000 ‘on airport’ jobs, and around a further 100-150,000 ‘induced’ jobs – in companies trading with or because of the airport such as logistics hubs, aero-engine maintenance, or airline catering.

Further, it is an important part of the location choice of many companies – from large ones like Canon, Coca-Cola and CBS, to smaller companies who need ready access to an airport either for moving staff or customers in and out, or for shifting product or raw materials.

Nigel Milton, Policy Director for Heathrow, outlined how a ‘hub’ airport works – adding short-haul transfer passengers to those generated in the host city to allow multiple long-haul routes to fly regularly with full planes. He showed how a split hub – two airports serving (say) eastern and western destinations would produce a doubling of less-efficient short-haul flights, and how two hubs linked by rail (such as the ‘Heathwick’ proposal) would provide uncompetitive transfer times – more than double that achieved by Amsterdam’s airport – and would not be a marketable choice.

His convincing case for a hub airport being essential to continue the UK’s position in the World economy was based on the natural efficiencies a hub delivers. Whe this is added to the fact that the UK has only one major ‘home’ airline – BA – it means there can only be one such hub, as BA will be unlikely to use two airports, having tried a split hub between Heathrow and Gatwick last century, and now describing it as their “worst ever strategic mistake”.

Corin Taylor, of the Institute of Directors (IoD) said while runway capacity was a key ‘crunch’ for the UK economy, there were other factors, such as visa availability, queues at border control, and in particular air passenger taxation (APT) where the government could take a hand in helping.

APT has been shown in Holland to cost an economy three or four times more in ecoomic drag than it raises in taxes. The UK should drop or reduce theirs to reduce costs to airlines and ultimately passengers, he said.

On the subject of aviation expansion, he said while it was ikely that runway capacity around London would be fully used by 2040, the history of aviation forecasts is that they are overoptimistic, and that the most sensible choice now would be to expand what we already have, and take another view further down the line, a sentiment echoed by Lord Clive Soley, who said we need to expand Heathrow now, with a third runway, and then see what might be required further to that.

Without this immediate expansion he felt the UK would fall behind other economies as international business increasingly bypassed a difficult and expensive London in favour of easier alternatives.

Taylor also suggested that the present ‘operational freedoms’ – where Heathrow is allowed to switch into mixed-mode (using both existing runways at the same time) when delays hit a certain threshold – should be made permanent, as they simply allow the airport to catch up when it needs to, without placing an extreme noise burden on the surroundings.

On noise, while all speakers were aware it was an issue for people, the feeling was that with continual innovation in aircraft design, it would not be an increasing problem with increasing traffic.

Neil Impiazzi of SEGRO, owners of 6m sq ft of industrial space around Heathrow said they had built that asset base “because it was where his customers wanted to be”. His tenants – like Rolls-Royce, or DB Schenker, often make their location decision primarily because of the airport. SEGRO had redeveloped the foremr Gate Gourmet site for those two tenants, proving that the airport assisted regeneration, he said.

Impiazzi made the point that many of his tenants use Heathrow as a freight tool – it shifts six times the freight of the nearest UK rival airport. Further, most freight is in the belly of passengers planes, so just as plans to separate business and leisure travel at different airports are flawed, the idea that you could have a passenger and a freight airport was not useful. This harked back to the ‘hub’ concept – routes work for airlines because they can fill the planes with passengers and packages.

Lord Soley said the decision, while it affects business, was largely political, and that it would require leadership and vision. He urged West London’s local authorities to “get their act together”, using an example where Wandsworth recently called for a rail link to Heathrow from Clapham Junction, but continue to lead the 2M Group’s campaign against Heathrow – they can’t have it both ways.

He ccontinued on the theme, saying local councils should realise that Heathrow is an essential part of their economy, and the value proposition for commercial and domestic property in the sub-region and beyond, and that they should start saying so – back Heathrow or lose it.

He called on Boris Johnson to say what should happen to Heathrow in the event of his estuary airport plan coming to fruition. He issued a challenge to the Mayor: “Set up a research study into the effects of a new hub on Heathrow. I believe that study will predict closure. You seem unsure.”

“No more ducking and diving on this crucially important question. You owe it to the people of London.”

The room agreed that the closure, or even significant decline, of Heathrow is not something that should be allowed to happen without a plan to replace this economic contribution. Speakers were clear that such a thing would be similar to the unmitigated collapse of the London Docklands, which, although now home to Canary Wharf, still leaves as its legacy swathes of inner-city wasteland, even after thirty years of regeneration investment, and sees living standards and property prices lower in east London than in the West.

One plan opened up in discussion was for the redevelopment of Heathrow as a ‘new city’. Images had been shown earlier in the evening of some of the emerging masterplans for the site, which, on present property valuations, could generate around £10bn of development profit if turned into – as one delegate suggested – around 450m sq ft of commercial and residential property. This would also, he contested, solve the population problem that London has, with that forecast to rise by over a million.

This suggestion that this could fund a new airport was problematic, felt speakers and other delegates. The development profit, being on private land, would belong to the shareholders of Heathrow Airport, who are largely foreign governments or institutions. Their willingness to transfer that to the construction of a new airport would be key to the success of that plan.

The other snag was summarised by the question “who would want to live or work there, if there were no airport?”. If the departure of Heathrow would mean the departure of 200,000 jobs, the area might not be so desirable. Certainly, without an accompanying plan for the kinds of commercial occupier who might move in, it is unlikely to succeed.

As Lord Soley said, “If you want silence, I can give you silence. Close Heathrow, and you will have the silence of an economic graveyard.”

 

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